How to cut business costs
Every business owner is always looking for ways to cut the costs of doing business. Cost cutting is an integral part of keeping the finances of any business healthy. Cost cutting is especially important, for small businesses, who must be vigilant about every dollar that they spend. However, it cannot be stressed enough, that when any business owner begins to cut cost, they should do so carefully. While it is important to cut enough to keep your business running, if you cut to deeply, your business may not have what it needs. You should consider each cut you make carefully and concisely. Here is what you need to know about how to cut business costs-
- If it doesn't contribute to the bottom line it needs to go-Anything that is costing your business money, but is not contributing to the bottom line, should get cut. While you may appreciate some of the luxuries of these types of costs, if you can't afford them and they don't directly affect your profit line, then you should get rid of them, or at the very least reduce them. It is important to note that these items are anything outside the realm of salaries. Your staff may need to be informed that cutting these types of costs can mean the difference between keeping all employees are laying someone off. If you have several departments, within your business, you can charge them, with coming up with costs that can be cut or reduced.
- If it happens outside of your business take a close look at cutting it-One of the major expenses in this category is travel. Today, there is a great deal of technology that can reduce the need, for travel. Many businesses are choosing to use online video services, for meetings or conferences, rather then send employees to physically be there. This type of technology can save the costs of flying, driving, hotel stays and other applicable expenses. You can use this technology for business presentations, that can be made, for a fraction of the cost of travel. Another expense in this category, is vehicles. If you are having to pay for vehicles, or driving expenses, you should take a close look at how effective they are, for your business and if you really need them.
- If it isn't producing then you should consider reducing it-The biggest expense in this category is staffing. If your staffing expenses are not in line with your production or sales figures, then you may need to reduce workforce hours. You should focus on productivity (remember sales is productivity in a retail environment) and determine if you have the right number of employees working. Many times you can scale back on the number of employees you have working, without having to actually cut jobs. If you feel that your productivity can be increased you may also want to extend the hours of operation, while using fewer employees. This way you can reduce costs and improve productivity.
- If it doesn't have a high rate of return consider reducing or eliminating it-Many times business owners make the mistake of cutting their marketing, when they are cutting costs. This can result in a serious problem, for the business. Keep in mind that if your potential customers don't know where to find you or don't know what you have to offer, how will you make any sales? You need to not just reduce marketing, but consider if where you are marketing brings in the biggest return. You may find upon close examination that you can both reduce the cost of your marketing and make it more effective.